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How to Evaluate Providers with Procurement Process?

Posted on December 13, 2020December 16, 2020 by Michael

Selecting effective suppliers is an integral task for the Procurement department. It is important when doing so that there is consistency of approach between different buyers and various suppliers. Here’s a very simple but efficient way to make this happen. There are four aspects of a Supplier that you will need to evaluate. These are:-

The attitude of the provider This covers items such as:-

  1. A willingness to react to Your needs
  2. The capacity to respond to your needs
  3. The quality of the consultation with you on new product development
  4. The quality of market information they provide to you
  5. Initiatives in creating price reductions

Technical ability There are three elements of technical skill that you need to evaluate.

  1. Their technical competence
  2. Their process capacity
  3. Their control of these processes

Commercial aspects The Commercial aspects you might want to evaluate include:-

  1. Lead time to deliver goods Or services
  2. The positioning of the provider
  3. Delivery frequency
  4. Any minimum purchase amounts
  5. The proportion of programs that are full of full and on time
  6. Your appraisal of supply risk
  7. The purchase price

Financial standing There are three key evaluation criteria.

  1. The credit terms they offer To you
  2. Their credit score
  3. Key financial ratios like liquidity ratios return on capital and profit margins.

Once you have compiled your List of items to evaluate, here’s a fantastic way of deciding in your evaluation score. Rate the supplier being evaluated on a scale of 1 to 5 to each item in your list. The scores are determined as follows.

1 = bad and could not be Improved in the short term

2 = poor but could be improved with appreciable effort

3 = meets the standard required in most facets

4 = meets the standard required in most facets

5 exceeds all the standards

Would you like to learn more about effective procurement?

This is a whole subject on its own but commonly includes procurement process intelligence on trends and indices relating to market rates. After all, it is a good idea to find out that you are paying prices that are 10 percent less than last year however when the market as a whole has dropped by 20 percent your performance suddenly does not seem so great.

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